Hotel Online  Special Report
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 The Spanish Hotel Industry has Finally Seen
the Light at the End of the Tunnel
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Paris, 6 June 2006
  • Following three consecutive years of declines in RevPAR, the Spanish hotel industry is finally posting positive results (a 5% increase in RevPAR in late April)
  • This growth was twice as rapid as European growth in late April 2006
  • Thanks to the very competitive conference and seminar segment, which is enjoying a boom, Madrid and, to a greater extent, Barcelona, have gained market shares from traditional destinations. For example, the 3GSM World Congress, previously held in Cannes, has boosted results in Barcelona: a 20% increase in RevPAR in February.
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Annual Variations in RevPAR in Spain and Europe* 


Source: MKG Consulting Database official supplier to hotel chains May 2006 Hotelcompset
ADR and RevPAR are expressed in euros inc. VAT
*Europe = European Union of 25

Following three consecutive years of decline, Spain finally climbed out of the red in late April 2006. As in other European countries, 2003 was a bad year for Spain (-4.2% in RevPAR). Whereas Europe saw an upturn in the following year, however, Spain registered
some of the worst results on the Continent in 2004, and was unable to recover in 2005.

The reasons behind these bad results are well known. Firstly, hoteliers have suffered from problems of overcapacity. Developers have been particularly active and Spanish hotel supply increased by 20% between 2001 and 2005 (whereas supply grew by less than 1%
in France and fell by 2% in Germany and 5% in the United Kingdom during the same period). Secondly, the Madrid bombings worsened an already precarious situation in 2004. Finally, competition from emerging countries in the Mediterranean Basin penalised
resort hotels, which are too numerous along the Spanish coastline.

Since mid-2005, however, hoteliers have seen considerable improvements in their results and therefore posted a 5% increase in cumulated RevPAR over twelve months. This growth was twice as rapid as that of the European hotel industry.

Various factors explain the upturn in the Spanish hotel industry:
 

Highly dependent on economic growth, the hotel industry, and the 3* and 4* categories in particular, have benefited from strong growth in GDP. By the end of 2005, for example, growth in GDP had reached 3.3% in Spain and 1.7% in the European Union. Responding to high domestic consumption in particular, this growth benefited the Spanish hotel industry fully. 
Madrid and Barcelona, the locomotives for the Spanish hotel industry, have finally overcome the difficulties that these markets had been experiencing. Although April 2006 posted a decline in RevPAR (as compared to very good results in April 2005), Barcelona has consistently improved its monthly results since November: +1.9% for RevPAR in November, +6.7% in December, +13.5% in January, +20% in February and almost as much in March. Madrid has now totally overcome the consequences of the terrorist attacks of 2004 and even closed the year with an increase in RevPAR (+2.9%) in 2005. These trends were confirmed in the first trimester of the year with an increase in RevPAR that neared double figures.
The third factor is that Spain has been consistently gaining market shares from its European neighbours in the conference and seminar segment. Spain is yet to host as many international trade fairs and congresses as France and Germany, but it now has very competitive infrastructures at its disposal. Barcelona, for example, has had at its disposal since 2004 a convention centre which totals 100,000m2, the CCIB, which hosted the 3GSM World Congress, the flagship event in the mobile telephone industry, this year for the first time. This event was previously held in Cannes, France.
The fourth factor is that visitor numbers in Spain have increased greatly in recent years due to the boom in low-cost airlines in particular: Iberia recently announced the creation of a new airline, whereas growth in the air traffic of low-cost airlines flying to and from Spain is very strong.
Finally, the country is reaping the rewards of promoting the destination: the French Minister of State for Tourism has stated that spending on tourism promotion is five times higher here than in France. The Spanish government invests approximately 150 million euros in promoting the destination per annum, in addition to approximately 230 million euros that are invested by private organisations.

Problems of overcapacity have not, however, been confined to the past. Several projects should get off the ground over the coming years. Nevertheless, the market remains very divided. The market leader, Sol Melia, does indeed account for over 40,000 rooms, but
trailing behind, the other groups, with the exception of TUI, account for less than 20,000 rooms. If the upturn in hotel results in Spain is confirmed over the coming months and years, it may lead to an important concentration movement as in countless other
operations in the United Kingdom and France last year.

Methodology

MKG Consulting is the European leader in consulting services in the hotel, tourism and catering sector and has the largest hotel database in the world outside the United States, with good representation of all hotel segments. The monthly program of the MKG Consulting Database is based on a sample of 10,000 corporate chain hotels, accounting for 1,000,000 rooms (the sample increased by 10% in 2005).

Since September 2004, the MKG Consulting Database has proposed a program that enables activity indicators to be monitored hotel by hotel on a daily basis. This program includes 1,500 hotels and 125,000 rooms in France, making it the most developed program charting daily hotel results in Europe.

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Contact:

Georges Panayotis
+ 33 (0)1 56 56 87 90
georges.panayotis@mkg-group.com

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Also See: Increased Average Rates and Improved Occupancy Continue Through First 9 Months of 2005 for European Hotel Industry; Business and Leisure Tourists Have Adapted to the Uncertain Environment / November 2005
France and the United Kingdom are Leading in the European Hotel Industry / July 2005

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